Global oil and fuel prices surged after the European Union (EU) struck a deal to ban nearly 90% of Russian oil imports by the end of 2022, market data showed.
The Brent crude futures index, the global oil benchmark, for July spiked above $124.07 per barrel Tuesday morning, surging nearly 2% overnight before falling slightly. The U.S. WTI July futures index skyrocketed more than 2.7% to $118.11 per barrel and the current price increased 3% surpassing $118.50 a barrel.
“We believe once the fine print of the EU ban becomes clearer in coming days, as to the timing and full extent of the ban, we could see oil prices move beyond $130 per barrel,” DBS Bank lead energy analyst Suvro Sarkar said, Reuters reported.
European Commission President Ursula von der Leyen and European Council President Charles Michel announced they had reached the deal late Monday. Global oil prices are expected to average $101.89 a barrel, up more than $1.70, in 2022 as a result of the action, according to a Reuters poll of 33 economists.
“Thanks to this, the Council should now be able to finalize a ban on almost 90% of all Russian oil imports by the end of the year,” von der Leyen remarked. “This is an important step forward. We will soon return to the issue of the remaining 10% of pipeline oil.”
About 50% of Russian oil exports were sent to the EU in 2021, according to the Energy Information Administration (EIA). Therefore, the bloc’s ban announced Monday would leave a roughly 2-million-barrel-per-day gap, potentially affecting a wide swath of Europe’s economy.
German economic minister Robert Habeck previously warned that a ban on Russian oil would harm EU nations.
The EU ban will also likely impact the U.S. energy market impact, increasing pressure on both refining and exports, potentially causing further domestic price hikes. The U.S. exported 3.3 million barrels of crude oil and 3.1 million barrels of petroleum products in March while refiners boosted utilization to 91.3%, up from February levels, EIA data released Tuesday showed.